In a topsy-turvy session that made traders glad the weekend wasnear, natural gas futures spiked and retraced three times Fridayamid a bevy of fundamental and technical news. After encounteringsubstantial selling in the low $6.80s early in the day, the Januarycontract checked sideways for much of the session, finishing up 8.4cents at $6.673. Comparatively the rest of the 12-month strip, ledby March, which erupted 20.7 cents to close at $6.043, experienceddouble-digit gains.

Since notching a $6.02 low amid an expiration-day sell-offTuesday, the January contract had posted an impressive two-day,57-cent rally through the close of business Thursday. Many tradersand market watchers polled by NGI on Thursday believed the $7.00level would easily be tested on Friday. However, they did notanticipate what was about to happen in the nearby crude oil pit onFriday.

Despite the halting of nearly 3% of the world’s oil productionby Iraq late Thursday, crude oil futures slipped lower Friday,shedding more than 5% of its value to close at $32.02, a newthree-week low. However, the move lower did not come as too big ofa surprise for energy analyst Tim Evans of New York-based IFRPegasus. “The market has shown in the past, rather emphatically,that it is not bothered by the Iraqis halting exports as long asthe U.S. is willing to dip into its Strategic Petroleum Reserve..On the one side of the price equation you have a shortage of 2.4million barrels [of Iraqi imports] a day. On the other side, yourhave U.S. government stockpiles totaling 541 million barrels.” Inaddition to the U.S stores of oil, the International Energy Agencywas being tapped on Friday for the possible release of additionalreserves.

Several gas traders were quick to point the erosion in thenearby crude oil pit as a key factor in the inability of naturalgas to test resistance at the psychologically important $7.00 levellate last week. “Natural [gas] wasn’t the only game in townFriday,” said a risk manager. “All of a sudden you have crudeprices dropping out of the sky. That definitely took away from therally in gas.”

However, looking ahead, Evans is doubtful the events in thecrude oil pit will have a lasting effect on natural gas prices.”This will be a little bit of a sideshow, but I don’t think it willweigh on gas prices too much. After all, there is no governmentstockpile for natural gas.”

The American Gas Association will likely take center stage againthis week when it announces its latest storage report. Last year atthis time the market withdrew 69 Bcf from underground storagefacilities and the five-year average is a net draw down of 50 Bcf.Although he will revise his estimate early this week, Evans looksfor the AGA to announce a withdrawal of 80-100 Bcf. Last week AGAsaid that 146 Bcf was pulled from the ground, the largest takeawayever in the month of November. Two weeks ago, the market withdrew94 Bcf when temperatures were similar to those seen across thenation last week.

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